[🇧🇩] Monitoring Bangladesh's Economy

[Saif]

Global economic prospects and Bangladesh

Forecasting or projecting the world economic conditions for the near future is a regular exercise of a number of international bodies or organisations. The projections are primarily linked to a number of 'ifs' and 'buts', which minimises the scope for blaming organisations for wrong forecasts. The

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Global economic prospects and Bangladesh

Asjadul Kibria
Published :
Jan 11, 2026 00:10
Updated :
Jan 11, 2026 00:10

Forecasting or projecting the world economic conditions for the near future is a regular exercise of a number of international bodies or organisations. The projections are primarily linked to a number of 'ifs' and 'buts', which minimises the scope for blaming organisations for wrong forecasts. The World Bank, International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), and United Nations (UN) are four leading organisations that regularly forecast near- and long-term economic trends worldwide. Other organisations, such as the World Trade Organisation (WTO), forecast trends in global trade and use macroeconomic projections from the World Bank or the IMF. Organisations like the Asian Development Bank (ADB) focus on regional economic trends.

To predict the future of economic growth and inflation, the two most significant macroeconomic indicators, the organisations use various techniques and tools. Empirical data on economic indicators such as exports, imports, consumption, investments, interest rates, industrial output, consumer confidence, workers' productivity, retail sales, and unemployment rates are used to understand past trends. Geopolitical trends, such as wars and conflicts, and natural disasters, such as floods and droughts, are also taken into account by converting them into quantifiable variables. Models are applied to infer possible future scenarios using empirical data and other variables. Though economic forecasting is more than a century old, it gained momentum after the Great Depression in the 1930s.

The task of prediction, however, is tricky and complex, as economic environments are always changing. The conditions that shaped past events, such as technology, government policies, or global markets, may not be similar today or tomorrow. So, patterns of the previous years are unlikely to repeat exactly. In many economies, data quality is poor, leading to wide-ranging incorrect projections. The models used to predict the future also have limitations, as they are based on assumptions that may not be true. For instance, it is generally assumed that an economy goes through a business cycle, meaning that economic expansion is followed by a contraction, which then enters an expansionary phase later. Economic models, based on the alternating phases of expansions and contractions of the business cycles, predict that a recession will be followed by a recovery. Usually, forecasting models have tended to smooth out predictions. Forecasts may also be influenced by personal theories or biases. Human behaviour is another factor that may nullify the forecast. In many cases, people and markets often react to forecasts themselves, causing shifts that models cannot predict. Economists who generally forecast using various high-tech models mostly failed to predict most recessions over the last five decades. The most vivid example is the subprime mortgage crisis in the United States (US) that led to the global financial crisis in 2007 and the Great Recession in 2009.

Nevertheless, international organisations are making predictions and projections with the above-mentioned limitations, as these projections are critical for policymakers, investors, and consumers. Having an idea of where the economy might be headed helps them make better decisions about what to do today.

Last week, the United Nations Department of Economic and Social Affairs (UNDESA) released the World Economic Situation and Prospects 2026. It says the world economy is expected to grow by 2.7 per cent in 2026, slightly below the 2.8 per cent estimated for 2025 and well below the pre-pandemic average of 3.2 per cent. The report finds that last year, unexpected resilience to sharp increases in US tariffs, supported by solid consumer spending and easing inflation, helped sustain growth. According to the report, headline inflation declined from 4.0 per cent in 2024 to an estimated 3.4 per cent in 2025, and is projected to slow further to 3.1 per cent in 2026.

UNDESA identifies five key factors clouding the global economic outlook: increased macroeconomic uncertainties, shifting trade policies mainly due to the sharp rise in US tariffs by President Donald Trump, persistent fiscal challenges, geopolitical tensions, and financial risks. The abduction of Venezuelan President Nicolas Maduro and his wife Cilia Flores by the US army in the first week of the New Year has sharply increased global geopolitical tension. Trump is now threatening Iran with a hard strike, and he may order US troops to attack Iran at any time. These unseen and unpredictable factors are not directly included in projections for the global economy in 2026. It was also not possible to do so.

UN expects 'broadly stable growth prospects for major economies' but 'uneven growth momentum across developing regions'. For South Asia, the economic outlook remains robust, driven by strong private consumption and public investment. The regional gross domestic product (GDP) is expected to expand by 5.6 per cent in 2026 and 5.9 per cent in 2027, following an estimated 5.9 per cent growth in 2025.

In India, growth is estimated at 7.4 per cent for 2025 and forecast at 6.6 per cent for 2026 and 6.7 per cent for 2027, backed by resilient consumption and robust public investment. The UN expects these two factors to largely offset the adverse impact of higher US tariffs. The latest US move to impose 500 per cent punitive tariffs on India for purchasing Russian oil is not included in the projection. If imposed, a 500 per cent tariff would amount to a trade embargo, making Indian goods commercially unviable in the US market. An estimate shows that exports of $120 billion may take a severe hit, with labour-intensive sectors like textiles and gems and jewellery facing closures and job losses. These sectors have already been under 50 per cent tariffs since August last year.

Average consumer price inflation is predicted to rise from an estimated 8.3 per cent in 2025 to 8.7 per cent in 2026. Last year, inflation across the region declined in 2025, with rates in most economies at or below central bank targets and long-term averages. Bangladesh, however, faced an inflation rate above the central bank's target, averaging 8.90 per cent. The report also projects that the rate may come down to 7.10 per cent in the current year. According to UNDESA, Bangladesh is likely to continue recovering, with economic growth projected at 5.1 per cent in FY26. How much these projections will be realised remains to be seen.

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[Saif]

Bangladesh sees $1.12b in remittances in first 10 days of January

The remittance from Bangladeshi expatriates continued its upward momentum in January, with the country receiving more than US$1.12 billion in the first 10 days of the month. Bangladesh received $17.39 billion in inward remittances from July to January 10, 2026, in the current fiscal year, FY 2025-

thefinancialexpress.com.bd

Bangladesh sees $1.12b in remittances in first 10 days of January

UNB
Published :
Jan 11, 2026 21:46
Updated :
Jan 11, 2026 21:46

The remittance from Bangladeshi expatriates continued its upward momentum in January, with the country receiving more than US$1.12 billion in the first 10 days of the month.

Bangladesh received $17.39 billion in inward remittances from July to January 10, 2026, in the current fiscal year, FY 2025-26. It was 14.49 billion in the same period of the previous FY2024-25, saw a growth of 20 percent.

Blessings on the remittance, the gross forex reserves of Bangladesh cross $33 billion. As per the IMF standard BPM6, the forex reserves stood at $29 billion plus.

Arif Hossain Khan, Executive Director and spokesperson of Bangladesh Bank (BB), said the expatriates have sent $1.12 billion in the first 10 days of January 2026, which was $7.17 million in the same period of January 2025. It means the remittance earnings grew by 57.2 percent in this time.

The growth is attributed to several factors, including incentives offered for sending money through legal banking channels, increased encouragement for using the formal system, and the active role of exchange houses.

In the FY2025-26, Bangladesh received $2.47 billion in remittances in July, $2.42 billion in August, $2.68 billion in September, $2.56 billion in October, $2.88 billion in November, and $3.22 billion in December.

The data showed an average inward remittance of over $2.42 billion in the past six months, prompting Bangladeshi policymakers to favour remittance inflows over borrowing from the IMF with stringent conditions.​

 

[Saif]

Net FDI jumps over 200pc in Q3

Bangladesh recorded a robust rise in net Foreign Direct Investment (FDI) during July-September 2025, reflecting positive investor confidence amid global uncertainties. According to the latest figures released by Bangladesh Bank, net FDI inflow for Q3 (Jul–Sep) stood at US$315.09 million, mar

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Net FDI jumps over 200pc in Q3

BSS
Published :
Jan 11, 2026 19:42
Updated :
Jan 11, 2026 19:42

Bangladesh recorded a robust rise in net Foreign Direct Investment (FDI) during July-September 2025, reflecting positive investor confidence amid global uncertainties.

According to the latest figures released by Bangladesh Bank, net FDI inflow for Q3 (Jul–Sep) stood at US$315.09 million, marking a 202 percent year-on-year increase from the $104.33 million recorded during the same quarter in 2024, said a press release.

Cumulatively, total net FDI inflows for January–September 2025 stood at $1.41 billion, marking an 80 percent increase compared to $780 million during the corresponding period of 2024.

All major FDI components saw significant improvement in Q3’25. Equity investment rose 31.69 percent YoY, from $76.79 million to $101.12 million; reinvested earnings soared 190.07 percent YoY, from $72.90 million to $211.47 million and intra-company loans reversed from a negative -$45.36 million to a positive $2.49 million.

This growth builds on a strong H1 performance. In April–June 2025, net FDI had already reached $303.27 million, compared to $272.22 million in Q2 of the previous year—representing a year-on-year gain of 11.4%. Overall, net FDI in H1’25 (January–June) increased by more than 61% compared to H1’24.

“BIDA’s core work is to improve the business climate and develop a credible pipeline of investment. It is encouraging to see this pipeline begin to convert into realized inflows. The benchmark remains low, but these back-to-back quarterly gains highlight that investors are placing their trust in Bangladesh,” said Ashik Chowdhury, Executive Chairman of BIDA.

“We expect some moderation in Q4’25 due to the upcoming elections, but anticipate a rebound post-election, supported by a strong investment pipeline,” he added.

Beyond the actualized figures, BIDA’s dedicated investment pipeline for 2025 has already surpassed $1.5 billion in addition to the traditional registered proposals.​

 

[Saif]

Govt. implementing reforms to foster liberalised economic environment: Bashir

Commerce Adviser Sk Bashir Uddin said that the government is implementing comprehensive reforms to trade policies and commercial laws to foster a more liberalised, inclusive, and justice-based economic environment on Sunday. The government is currently finalising changes to the Import Policy Order

thefinancialexpress.com.bd

Govt. implementing reforms to foster liberalised economic environment: Bashir

BSS
Published :
Jan 11, 2026 17:41
Updated :
Jan 11, 2026 17:41

Commerce Adviser Sk Bashir Uddin said that the government is implementing comprehensive reforms to trade policies and commercial laws to foster a more liberalised, inclusive, and justice-based economic environment on Sunday.

The government is currently finalising changes to the Import Policy Order (IPO) aimed at simplifying trade operations, he said.

“These reforms focus on easing transaction instruments and aligning conformity assessment requirements with international standards to which Bangladesh is a signatory. These amendments are expected to be presented to the Cabinet for approval very shortly, possibly in the upcoming session,” the adviser said while talking with reporters at Bangladesh Secretariat in the city.

In his speech, Bashir said that to make the legal framework more time-befitting for future economic challenges, several key pieces of legislation are undergoing amendments, including the Company Act, the Consumer Rights Protection Act and the Control of Essential Commodities Act (Competition Act).

The adviser emphasised that the ministry, along with its various wings, is working collectively to bring about structural, procedural, and cultural changes in the trade sector.

On the international front, he highlighted significant progress in trade negotiations.

Addressing trade relations with India, Bashir stated that daily bilateral incidents generally do not impact broader trade dynamics.

“While Indian port closures earlier this year (around May) led to a decrease in Bangladeshi exports, the government has refrained from taking counter-measures,” he added.

The adviser clarified that specific domestic policies, such as restrictions on jute exports, are designed solely to meet internal demand and maintain local supply, rather than to target any specific trading partner.

Bangladesh remains committed to liberal trade globally unless a particular trade situation is deemed harmful to the national economy, he added.

In anticipation of the upcoming month of Ramadan, the adviser announced that a stakeholder meeting is scheduled for January 19.

This meeting will involve a thorough review of the current stock and import status of essential commodities to ensure market stability and address potential price hikes, he added.​

 

[Saif]

Protecting local industries

For a developing country like Bangladesh, the importance of pursuing an import substitution strategy cannot be overstated. Import substitution is not merely about reducing dependence on foreign goods; it is a strategic pathway to building a robust industrial base, generating employment, saving fore

thefinancialexpress.com.bd

Protecting local industries

Published :
Jan 11, 2026 23:37
Updated :
Jan 11, 2026 23:37

For a developing country like Bangladesh, the importance of pursuing an import substitution strategy cannot be overstated. Import substitution is not merely about reducing dependence on foreign goods; it is a strategic pathway to building a robust industrial base, generating employment, saving foreign reserve and deepening backward linkages that support the export sector. Ironically, however, many of the country's local industries producing goods such as sugar, jute, yarn, handloom products and other items have already shut down or are on the verge of closure largely because imported goods are cheaper than their domestically produced counterparts. This exposes a stark reality of Bangladesh economy that when imported goods flood the market, locally made products remains unsold, triggering factory closures and large-scale layoffs.

The plight of local spinning mills vividly illustrates this problem. Over the years, nearly 500 spinning mills have been established to cater to the need for yarn in the country's thriving ready-made garment (RMG) industry. Yet, as Indian yarn is cheaper, the RMG sector has grown heavily dependent on imports for this critical raw material. While Bangladeshi mills sell 30-count yarn at around US$ 3.0 per kilogram, Indian producers sell the same yarn at US$ 2.60. Consequently, despite the government's ban on yarn imports through land ports, imports of Indian yarn surged by 137 per cent in the last fiscal year through sea ports. Estimates suggest that more than 80 per cent of the yarn used in the garment industry now comes from India. Meanwhile, leaders of the Bangladesh Textile Mills Association (BTMA) lament that unsold yarn worth around Tk 120 billion is currently lying idle in local mills. As a result, some 50 spinning mills have been forced to shut down operations in the past one year, leaving around 0.2 million workers unemployed.

The BTMA has called for the imposition of a safeguard duty on import, a 10 per cent cash incentive and other supportive measures to ensure the survival of the local spinning industry. In response, the government is reportedly considering a 20 per cent safeguard duty on imports of certain types of yarn. However, the move has run into a hitch as garment manufacturers have opposed it. Garment exporters say that they are also in favour of protecting the domestic spinning industry, but any move to raise import cost, ostensibly to compel them to buy local yarn at higher costs, would ultimately undermine their export competitiveness. This concern cannot be dismissed. The solution to the plight of local spinning mills does not lie in simply forcing garment manufacturers to buy costlier local yarn. Rather, the focus must be on enabling domestic spinners to become more competitive through modernisation, access to affordable fund and predictable, long-term policy support.

Other countries offer instructive examples in this regard. India, for instance, provides cash incentives of up to 15 per cent alongside dedicated funds for technological upgrades in the textile sector. Historically, most successful industrial economies nurtured their domestic industries through a mix of incentives, infrastructure investment and strategic protection. By contrast, Bangladesh reduced its cash incentive for domestic yarn production from 5.0 per cent to 1.5 per cent, at a time when producers were already struggling with rising costs. Policy inconsistency and weak institutional support have only compounded the problem. So, if protection of local industries is to move beyond rhetoric, Bangladesh must commit to a coherent industrial policy that prioritises competitiveness, technological upgrading and stability. Without such a framework, local industries will continue to wither under the pressure of cheaper imports. Without strong local industries, the promise of a self-reliant and resilient economy will remain out of reach.​

 

[Saif]

Overcoming economic malaises

The Centre for Policy Dialogue (CPD), a local think tank, has pinpointed the weaknesses of the country's economy and also recommended various measures to overcome those. In fact, the very title of the paper, "State of the Bangladesh Economy in FY2025-26" amply clarifies the objectives of the briefi

thefinancialexpress.com.bd

Overcoming economic malaises

Published :
Jan 13, 2026 00:25
Updated :
Jan 13, 2026 00:25

The Centre for Policy Dialogue (CPD), a local think tank, has pinpointed the weaknesses of the country's economy and also recommended various measures to overcome those. In fact, the very title of the paper, "State of the Bangladesh Economy in FY2025-26" amply clarifies the objectives of the briefing organised by the CPD's Independent Review of Bangladesh's Development (IRBD) programme at its Dhaka office. It has spelt out the challenges the government to be formed following the next month's general election will face. Strong fiscal discipline, according to the paper presented by Dr Fahmida Khatun, will be the key to a turnaround for the economy. The contractionary monetary policy now being followed cannot continue eternally. There is a compelling need for investment from the country's private sector as well as foreign sources. Unrelenting inflation with no compatible rise in income compounded by no job creation leads to stagflation which now stares in the face of Bangladesh.

The list of economic malaises is long but at a time when economists are in favour of private and foreign investments, the lowest ever ADP (annual development programme) implementation is a stark aberration. These are highly contradictory. ADP programmes not only boost infrastructure in developing countries but also create jobs. Why not the bungling bureaucracy be held accountable for this miserable performance? The interim government has totally failed to breathe fresh air into ADP execution and yet it goes for rewarding the same bureaucracy by offering salary increases for the inefficient behemoth. In the first quarter of FY2025-26, the ADP implementation was only 8.33 per cent, which increased to 11.75 per cent in the July-November period, forcing budget cuts. In the first quarter of the previous fiscal, the rate was 7.90 per cent, ending the year at 41 per cent. So, the rate may increase in the second and third quarters but still it will lag far behind the targets.

ADP programme implementation is fundamental for providing momentum to economic development through structural reforms and generation of employment. At the same time, mobilisation of tax by expanding the range and scope of taxable net prove vital for government's income. Now that debt servicing is eating away the country's income from taxes, export and remittance, the development fund is further squeezed. The heavy reliance on costly imported liquefied natural gas further reduces the accumulation of funds. To cope with the increasing demand for gas and power, there is no alternative to exploring local sources of gas and expanding the base of renewable energy. In this connection, climate change-induced compulsions may prove overriding within a few years.

That the time for trickle-down benefits of development for the poor is over should be kept in perspective of all development programmes. Education and skill must be compatible with industrial requirements in order to address the rising unemployment. The hard reality is that even if the educated youths are provided with jobs, there will be a huge legion of uneducated or barely literate young people. To bring them out of the rut, at least functional literacy with prospective skill development is required. As for food security of the most vulnerable, bottle-feeding has to be brought to an end at some point. The poor and vulnerable groups should be detected for initial support for education and health but the main objective would be to pull their next generation out of the poverty cycle. This is how they can cope with the supply side economy.​

 

[Saif]

BD in troubled waters of tomorrow

As is the usual practice every year, economists and experts on business trends locally and globally have been making their projections and predictions about how the country's as well as the world's economy will fare in the coming year (s). So far as Bangladesh's economy is concerned, much cannot be

thefinancialexpress.com.bd

BD in troubled waters of tomorrow

SYED FATTAHUL ALIM
Published :
Jan 13, 2026 00:21
Updated :
Jan 13, 2026 00:21

As is the usual practice every year, economists and experts on business trends locally and globally have been making their projections and predictions about how the country's as well as the world's economy will fare in the coming year (s). So far as Bangladesh's economy is concerned, much cannot be expected from it in the near future until its manufacturing sector comes of age. For, at present, the manufacturing is dominated by the Readymade Garment (RMG), which contributes roughly 25 per cent to the GDP and 81 per cent to the total export earnings. Overall, the manufacturing is contributing 34.81 per cent to the GDP.

The RMG sector demonstrated some resilience in the first half of last year, but in the second half its performance faced challenges (in November last year the export actually contracted) from external market due to uncertainties in international trade and politics. But to overcome Bangladesh's export-related challenges, diversification of exportable products as well as their destinations has become urgent. In this connection, the apparel industry's Apex body, BGMEA's talk of reaching a Free Trade Agreement (FTA) with Mercosur or Southern Common Market, which is a South American trade bloc, is a positive step forward. Notably, the size of the Mercosur economy is approximately USD 3 trillion. So, it is a move that may prove worth the while in the long run. The present-day world's economic order is highly volatile in the face of the US president Donald Trump's tariff-centred and other wars.

Bangladesh being an export-dependent economy, it could not remain unaffected by its impact since even after some exemptions, the main export item, the apparel products, would still have to pay 20 per cent tariff to enter the US market. The ongoing war in Ukraine, political volatility in the Middle East and other issues have reduced Bangladeshi apparel products' demand in their main destinations in the European Union (EU) and North American markets. And, following graduation scheduled for the month of November this year, the preferential treatment Bangladesh's exports had so far been receiving as a member of the LDCs from the EU markets might come to an end. So, the future does not hold much in store for Bangladesh as an export-and-remittance dependent economy. There are also challenges regarding remittance, given the political uncertainties in the Middle East. So, the hope that things both in the regional and international contexts would soon return to normalcy might prove to be a chimera. In that case, Bangladesh will have to fend for itself, keenly watch development abroad and prepare for the worst in the coming days. Economists and observers of the international financial markets are forecasting about the risk of another crisis in the global market driven by the US economy as the value of US dollar is falling. The US economy is facing a huge debt burden of USD38 trillion, with the public debt amounting USD30.8 trillion, which is between 120 and 125 per cent of that country's GDP. That explains to some extent President Trump's warmongering postures. In fact, US's economic decline vis-à-vis the rise of China's as a competitor on the global stage has a lot to do with the developments. The US-dominated unipolar world is giving way to multipolarity led by emerging economies like China. But changes are not going to happen smoothly. Bangladesh will have to learn to navigate through these ever-emerging complexities of the new world order in the making. That would require an able political leadership at the helm. It is expected that the elected government to take office following the February polls will be competent enough to efficiently deal with the upcoming challenges on the home as well as the regional and global fronts.​

 

[Saif]

Three economic priorities for the upcoming political government

The upcoming parliamentary election, scheduled for February 12, is of exceptional political and economic significance for Bangladesh.

www.thedailystar.net

Three economic priorities for the upcoming political government

By Fahmida Khatun

VISUAL: ANWAR SOHEL

The upcoming parliamentary election, scheduled for February 12, is of exceptional political and economic significance for Bangladesh. For many years, elections failed to serve as genuine instruments of democratic choice. The lack of meaningful opposition participation, allegations of vote manipulation, and ritualistic voting practices weakened democratic institutions and entrenched an increasingly authoritarian system. A generation of young citizens grew up without getting to exercise their right to vote, leading to political disengagement, erosion of public accountability, and a collapse of trust in state institutions. The election, therefore, offers a historic opportunity to restore democratic legitimacy, rebuild public confidence, and reset the relationship between citizens and the state.


However, restoring electoral credibility alone will not be sufficient. The next government will inherit an economy under severe strain after years of policy complacency, institutional erosion, and weak macroeconomic management.


In recent years, Bangladesh’s economic momentum has weakened. Growth has slowed, inflation has remained stubbornly high, and the banking sector continues to struggle under the weight of rising non-performing loans. Low private and foreign investment, inefficient public investment, rising public debt, declining real wages, and weak employment generation are placing a lasting strain on the economy.

Against this challenging backdrop, the newly elected government will inherit a daunting reform agenda aimed at restoring economic discipline, strengthening governance, and delivering better outcomes for ordinary citizens. The list of priorities is long and complex. However, three urgent and interconnected issues stand out and require immediate, decisive attention. These will shape not only the direction of economic recovery, but also the credibility and effectiveness of the new administration.


First, controlling inflation must be the new government’s top economic priority. Over the past several years, the country has experienced persistently high inflation, driven mainly by rising food and energy prices. As food accounts for more than half of household expenditure for low-income families, rising prices have significantly reduced purchasing power and increased financial pressure across income groups. Wage growth has lagged inflation, leading to declining real incomes and eroding household savings, while middle-income families have reduced spending on education, healthcare and nutrition.

High inflation also weakens overall economic performance. It creates uncertainty for businesses, discourages long-term investment, puts pressure on the exchange rate, and undermines confidence in economic management. Once inflation expectations become entrenched, restoring price stability becomes more difficult and costly.

Inflationary pressures reflect both global shocks and domestic policy weaknesses. While higher global commodity prices raised import costs, exchange rate controls delayed adjustment and encouraged speculation. Energy prices were kept below cost for years and then adjusted sharply, raising production costs. Heavy government borrowing from the banking system added demand pressures, while weak competition, poor storage facilities and inadequate transport infrastructure constrained food supply.


The next government must adopt a comprehensive and credible anti-inflation strategy. Bangladesh Bank should be granted clear operational independence to prioritise price stability, supported by a transparent interest rate framework aligned with economic conditions. Fiscal discipline must be restored by reducing reliance on bank borrowing and strengthening revenue mobilisation, so that monetary policy can operate effectively and inflationary pressures are contained.

Food market reforms should focus on strengthening competition, dismantling syndicates and hoarding, improving storage and transport infrastructure, and raising agricultural productivity. Energy pricing should follow a predictable, rules-based adjustment mechanism to avoid abrupt shocks. A transparent, automatic pricing formula, linked to global fuel prices and exchange rate movements, would allow gradual adjustments, reduce fiscal risks from subsidies, and provide greater certainty for households and businesses.


Second, private investment is essential to restoring growth, productivity, and job creation. Investment drives long-term economic expansion by supporting innovation, industrial upgrading and employment. In recent years, however, Bangladesh’s investment momentum has weakened. Private investment has stagnated, while rising public investment has delivered limited returns due to concerns about project quality, governance and efficiency.

Foreign direct investment remains particularly weak relative to regional competitors. This reflects persistent concerns about policy uncertainty, regulatory complexity, weak contract enforcement, infrastructure bottlenecks, bureaucratic inefficiencies, and financial sector fragility. Together, these factors have undermined investor confidence and discouraged long-term capital commitments.

The banking sector has become a major constraint on investment. Political interference, weak governance, and repeated loan rescheduling have eroded credit discipline. Productive firms struggle to access finance, while connected borrowers continue to receive preferential treatment, distorting capital allocation and weakening financial intermediation.

A comprehensive reform agenda is required to restore investment momentum. Banking sector governance must be strengthened, loan recovery enforced, asset quality reviews completed, and regulatory forbearance phased out. At the same time, the business environment must improve through streamlined regulation, digitised public services, simplified tax administration, reduced discretionary authority, and stronger contract enforcement.

Infrastructure development must prioritise efficiency and reliability over scale alone. Persistent weaknesses in power supply, ports, customs, and logistics continue to drive up business costs and undermine export competitiveness. Without modern infrastructure and predictable regulation, the country will struggle to integrate into global value chains and diversify its economy.

Third comes job creation. Bangladesh stands at a demographic crossroads. Around two million young people enter the labour force each year, yet employment growth has lagged far behind. Youth unemployment is more than twice the national average, and most new jobs are informal, with low productivity. Educated unemployment is rising, exposing a growing mismatch between education and labour market needs. This is not only an economic failure but also a social and political risk.

Job creation depends on restoring macroeconomic stability and reviving investment. High inflation erodes real wages, weakens consumer demand, and discourages hiring. Low private investment limits firm expansion and the formation of new enterprises. A stable macroeconomic environment, predictable policies, and a business-friendly regulatory regime are therefore essential foundations for employment growth.

Targeted labour market reforms are equally critical. Education and training must align with industry demand, with a major expansion of well-funded technical and vocational programmes. SMEs, the main source of employment globally, need easier access to finance, stronger market linkages, and simplified regulations. A focused SME growth strategy can rapidly create large numbers of jobs.

If employment opportunities grow, the gains will be transformative: higher incomes, lower poverty, stronger domestic demand, a broader tax base, and greater social cohesion.

The upcoming election is not only about who governs Bangladesh but also about how it is governed. Democracy must be matched by economic discipline, leadership and accountability. If the new government governs with courage and responsibility, the country can begin a new chapter of stability, opportunity and trust.

Dr Fahmida Khatun is executive director at the Centre for Policy Dialogue (CPD).​